Avoid Liability When Waiving Co-Payments

It is important that the supplier stay off the slopes that result in an enforcement action by a governmental agency. One of these slippery slopes pertains to waiving co-payments. While it is acceptable for a DME supplier to waive a co-payment when a customer establishes an inability to pay, the supplier can be subjected to liability if it routinely waives co-payments. There are two important federal statutes prohibiting routine waivers of co-payments for beneficiaries of federal and state health plans. The beneficiary inducement statute prohibits the offer or payment of remuneration to a beneficiary by any person/entity if the person/entity knows (or should know) that the remuneration is likely to influence the beneficiary to obtain items or services from a particular supplier. The definition of remuneration includes waivers or reductions of co-payment amounts, except when, 1) the waiver is not advertised or 2) the supplier does not routinely waive co-payments and either a) the supplier in good faith determines that the beneficiary is in financial need or b) the supplier fails to collect the co-payment after making reasonable collection efforts. The Medicare anti-kickback statute prohibits the offer or payment of remuneration to induce a person to purchase a Medicare-covered item or service. Remuneration is generally accepted to include transferring anything of value. The OIG has long taken the position that routine waivers of co-payments violate the anti-kickback statute. In 1991, the OIG issued a Special Fraud Alert on the topic. Although the anti-kickback statute and the related regulations do not contain an explicit exception for financial hardship, the OIG stated, “One important exception to the prohibition against waiving co-payments and deductibles is that providers, practitioners or suppliers may forgive the co-payment in consideration of a particular patient’s financial hardship. This hardship exception, however, must not be used routinely; it should be used occasionally to address the special financial needs of a particular patient. Except in such special cases, a good faith effort to collect deductibles and co-payments must be made.” Violation of either statute can lead to substantial monetary penalties as well as possible exclusion from the Medicare and Medicaid programs. It is important, therefore, for a DME supplier to adopt and enforce a policy of waiving co-payments only in individual cases where the supplier determines that the patient is financially needy. In addition, the supplier should avoid advertising that could be taken to imply that the supplier will routinely waive co-payments. In the case of commercially-insured patients, the rules vary depending on the location and the circumstances. A few states have statutes that specifically prohibit routine waiver of commercial payer co-payments. In a few others, there are Attorney General opinions or other written guidance that have the same effect. In states where co-payment waivers are not prohibited by law, the analysis depends first on whether the supplier has a contract with the payer. Most commercial payer contracts require suppliers to collect co-payments. When a supplier does not have a contract with a payer, courts in a few states have held that waiver of co-payments is nevertheless improper. In some cases, courts have based this holding on the insurance contract between the insurer and the beneficiary. In one prominent case, the patient’s policy stated that “no payment will be made for expenses incurred … for charges which the Employee or Dependent is not legally required to pay.” In other cases, insurers have claimed that a supplier that bills an insurer, while waiving a required co-payment, commits insurance fraud because the supplier is misstating its actual charge. There are different approaches to determining financial need. One is to collect detailed information on a patient’s income and expenses and analyze that information to determine whether the patient can afford to pay for the equipment he or she needs. Because it is generally difficult to verify a patient’s reported expenses, some suppliers choose to base their determinations only on the patient’s family income as measured against the federal poverty guidelines. A third approach combines elements of the first two. The initial determination is based on the poverty guidelines, but a patient who has unusual expenses may be determined to be needy despite exceeding the guidelines.